Just to elaborate a little more...
If you have the original files, encode 3 or 4 different resolutions and bitrates and use something like jwplayer to implement stream switching (which works on the flash player but not on the html5 fallback player).
The flash player will play the highest bitrate appropriate for that particular user and can drop back to a lower framerate without starting over if the network can't handle the bitrate. I started doing that on a blog last month and I am really surprised how much of a difference it made in my traffic and especially my bounce rate.
Unfortunately the html5 player can't do stream switching but it will play whatever video you want it to. I play my second lowest bitrate by default (which is 700k).
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